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Decisions Not Always Explained During Arbitration Process

Tuesday, July, 12, 2011

The arbitration process is often less transparent than proceedings in a public courtroom.  This facet of the process was aptly demonstrated in the recent case in which Wells Fargo Bank filed an arbitration claim with the Financial Industry Regulatory Authority (FINRA).  The bank, acting as a claimant in the case, sought approximately $15,000 in damages from Laurence DeBord, who represented himself before the arbitration board. 


At issue was an Investment Broker Agreement.  Wells Fargo claimed that DeBord owed fees and damages pursuant to the agreement; DeBord disputed the claim.  When the arbitration panel found in DeBord's favor, the members declined to offer an explanation or comment, merely releasing a decision that began, "Claimant's claim is denied in its entirety," and proceeded to also deny each claim individually.


Arbitration Process Protects Privacy


Arbitration panels often issue decisions without releasing their rationale.  While this can sometimes be frustrating for people who would like to better understand the panel's thoughts on an issue, the practice also serves to protect the privacy interests of the parties in dispute. In the Wells Fargo case, industry watchers have expressed curiosity not only about the fact that the huge financial institution lost the case, but also interest in why they filed the arbitration claim in the first place, considering that their claim for damages was so low. Other financial issues that frequently avoid court include bankruptcy arbitration.